SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2000 Commission File Number 0-7475
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PHOTO CONTROL CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-0831186
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4800 Quebec Avenue North, Minneapolis, Minnesota 55428
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (763) 537-3601
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(Former name, former address, and former fiscal year if changes since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at July 14, 2000
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Common Stock, par value $.08 1,604,163 Shares
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PHOTO CONTROL CORPORATION
INDEX
PART I Page Number
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ITEM 1: Financial Information
Balance Sheet -
June 30, 2000 and December 31, 1999 3
Statement of Operations -
Six Months and Three Months Ended
June 30, 2000 and 1999 4
Statement of Cash Flows -
Six Months Ended June 30, 2000 and 1999 5
Notes to Financial Statements 6
ITEM 2: Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II
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ITEM 2: Changes in Securities 9
ITEM 4: Results of Vote of Security Holders 9
ITEM 6: Exhibits and Reports on Form 8-K 9
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PHOTO CONTROL CORPORATION
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
---- ----
<S> <C> <C>
ASSETS
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Current Assets
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Cash $ 1,245,001 $ 819,302
Accounts Receivable 934,349 647,597
Inventories 4,312,384 4,478,640
Prepaid Expenses 74,430
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Total Current Assets 6,491,734 6,019,969
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Other Assets
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Cash Value of Life Insurance 321,660 308,166
Deferred Income Taxes 160,000 160,000
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Total Other Assets 481,660 468,166
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Plant and Equipment
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Land and Building 2,293,818 2,293,818
Machinery and Equipment 2,994,009 3,173,990
Accumulated Depreciation (3,769,391) (3,846,133)
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Total Plant and Equipment 1,518,436 1,621,675
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$ 8,491,830 $ 8,109,810
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
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Accounts Payable $ 442,132 $ 281,417
Accrued Payroll and Employee Benefits 247,001 220,848
Accrued Expenses 404,575 264,952
Customer Deposit 406,250
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Total Current Liabilities 1,093,708 1,173,467
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Other Accrued Expense 725,166 685,148
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Stockholders' Equity
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Common Stock 128,333 128,333
Additional Paid-In Capital 1,393,484 1,393,484
Retained Earnings 5,151,139 4,729,378
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Total Stockholders' Equity 6,672,956 6,251,195
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$ 8,491,830 $ 8,109,810
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</TABLE>
See accompanying notes to financial statements.
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PHOTO CONTROL CORPORATION
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
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2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $3,718,870 $2,744,327 $5,827,462 $4,573,879
Cost of Sales 2,591,760 1,881,113 4,175,140 3,234,830
---------- ---------- ---------- ----------
Gross Profit 1,127,110 863,214 1,652,322 1,339,049
Expenses
Marketing & Administrative 496,445 425,089 964,207 924,660
Research, Development & Eng. 125,172 154,901 266,354 331,191
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621,617 579,990 1,230,561 1,255,851
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Net Income $ 505,493 $ 283,224 $ 421,761 $ 83,198
========== ========== ========== ==========
Net Income Per Common
Share - Basic $ .31 $ .17 $ .26 $ .05
========== ========== ========== ==========
Net Income Per Common
Share - Diluted $ .30 $ .17 $ .25 $ .05
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
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PHOTO CONTROL CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30
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2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net from operations $ 421,762 $ 83,198
Items not affecting cash-
Depreciation 132,000 144,000
Deferred compensation 75,000 75,000
Loss on sale of equipment 12,889 36,600
Payment of deferred compensation (34,982) (33,238)
Change in:
Receivables (286,752) (505,530)
Inventories 166,256 (606,486)
Prepaid Expenses 74,430 49,764
Accounts Payable 160,714 433,798
Accrued Expenses (240,474) 24,596
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Net cash used by operating activities 480,843 (298,298)
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Cash flows from investing activities:
Additions to plant and equipment (41,650) (7,928)
Additions to cash value of life insurance (13,494) (13,494)
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Net cash used in investing activities (55,144) (21,422)
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Change in cash 425,699 (319,720)
Cash at beginning of period 819,302 731,426
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Cash at end of period $ 1,245,001 $ 411,706
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</TABLE>
See Accompanying notes to financial statements
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PHOTO CONTROL CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 1
Notes to financial statements presented herein do not include all the
footnotes normally presented in the Company's annual report to
stockholders.
The accompanying financial statements reflect, in the opinion of
management, all normal and recurring adjustments necessary to a fair
presentation of financial position, results of operations, and cash
flows for the interim periods. The results for interim periods are not
necessarily indicative of results to be expected for the year.
NOTE 2
Inventories are analyzed as follows:
JUNE 30 DECEMBER 31
2000 1999
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Raw Materials $ 3,959,239 $ 4,237,561
Work in Progress 352,786 257,031
Finished Goods 1,732,359 1,626,048
Reserve for Obsolescence (1,732,000) (1,642,000)
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$ 4,312,384 $ 4,478,640
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NOTE 3
Net Income per common share is computed based on the weighted average
number of common shares outstanding during the period when computing
the basic earnings per share. When dilutive, stock options are included
as equivalents using the Treasury Stock method when computing the
diluted earnings per share.
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PHOTO CONTROL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
Sales for the second quarter ended June 30, 2000 were $3,719,000, an increase of
35.5% from the same quarter in the prior year. Sales for the six months ended
June 30, 2000 were $5,827,000, an increase of 27.4% over the same period in the
prior year. Lighting sales decreased $346,000 for the second quarter and
$710,000 for the year to date period, as compared to the same periods in the
prior year. A decrease in orders from large customers accounted for the sales
decreases in the lighting product line. The camera product line accounts for an
increase in sales of $1,340,000 for the second quarter and $1,950,000 for the
year to date period, as compared to the same periods in the prior year. The
increase in camera product line sales is attributable to the $6,200,000 camera
contract for which shipment began in December of 1999 and will continue through
April of 2001. As of June 30, 2000 the contract is forty-two percent complete.
Sales of the third product line, printers, decreased by $19,000 for the second
quarter and increased $14,000 for the year to date period, as compared to the
same periods in the prior year. The sales trend for the printer line continues
to decline because the optical photographic printer market continues to
experience consolidation and excess capacity.
The gross profit margin for the second quarter of 2000 decreased to 30.3% from
31.5% in the second quarter of 1999. The gross profit margin for the six months
ended June 30, 2000 decreased to 28.3% from 29.3% in the prior year period.
Gross margin varies depending upon the product mix of sales. Management expects
that the margins for the year 2000 will be approximately 28%.
Marketing and administrative expenses decreased as a percentage of sales to
13.3% for the second quarter of 2000 from 15.5% for the second quarter of 1999
and decreased to 16.5% for the first six months of 2000 from 20.2% for the same
period in 1999. Marketing and administrative expenses increased $71,000 for the
second quarter of 2000 as compared to the second quarter of 1999 and increased
$40,000 for the first six months of 2000 compared to the same period in 1999.
Research, development and engineering expense decreased by $30,000 for the
second quarter of 2000 compared to the second quarter of 1999 and decreased by
$65,000 for the first six months of 2000 compared to the same period of 1999.
The increase in the marketing and administrative expense reflects additional
compensation earned as the result of increased profitability. Research,
development and engineering expense reflects the reorganization of the
engineering department in 1999 which has resulted in lower cost, primarily due
to a reduction in staff and increased efficiencies.
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LIQUIDITY & CAPITAL RESOURCES
Cash increased by $426,000 to $1,245,000 since December 31, 1999. Operations for
the six months ended June 30, 2000 resulted in $481,000 of positive cash flow.
At June 30, 2000 there is no borrowing under the line of credit. The Company can
borrow up to $1,000,000 under its line of credit. The line is unsecured, at the
prime rate of interest and renewed annually in May.
The Company believes that its cash flow from future operations and available
borrowing capacity will be sufficient to finance operations and capital
requirements.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Statements included or incorporated by reference in this Quarterly Report on
Form 10-Q which are not historical in nature are identified as "forward looking
statements" for the purposes of the safe harbor provided by Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. The Company cautions readers that forward looking
statements, including without limitation, those relating to the Company's future
business prospects, revenues, working capital, liquidity, capital needs,
interest costs, and income, are subject to certain risks and uncertainties that
could cause actual results to differ materially from those indicated in the
forward looking statements. The risks and uncertainties include, but are not
limited to, economic conditions, product demand and industry capacity,
competitive products and pricing, manufacturing efficiencies, new product
development and market acceptance, the regulatory and trade environment, and
other risks indicated in filings with the Securities and Exchange Commission.
8
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ITEM 2. CHANGES IN SECURITIES
Common Stock
------------
Additional
Number of Paid In Retained
Shares Amount Capital Earnings
------ ------ ------- --------
Balance at
December 31,1999 1,604,163 $ 128,333 $1,393,484 $4,729,378
Net Income 421,761
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Balance at
June 30, 2000 1,604,163 $ 128,333 $1,393,484 $5,151,139
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ITEM 4. RESULTS OF VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on May 11, 2000 the following matters
were approved by the Company's stockholders:
1. Set the number of directors at six (6). The voting results
were: 1,292,404 For, 28,578 Against and 2,225 Abstained.
2. Elected Messrs. James R. Loomis and John R. Helmen to the
Board of Directors for a three-year term or until the election
and qualification of a respective successor.
The voting results were as follows:
FOR TO WITHHOLD AUTHORITY
James R. Loomis 1,300,684 22,523
John R. Helmen 1,289,140 34,067
Messrs. Thomas J. Cassady, Mark J. Simonett, Scott S. Meyers
and Leslie A. Willig are directors of the Company whose terms
of office continued after the annual meeting of stockholders.
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
A. Exhibits - 27 Financial Data Schedule
B. Reports on Form 8-K - None
PHOTO CONTROL CORPORATION
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(Registrant)
July 26, 2000 /s/ J. R. Helmen
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Date J. R. Helmen, President and Chief Executive Officer
July 26, 2000 /s/ C. R. Jackels
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Date C. R. Jackels, Vice President-Finance
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